SCHRODER SINGAPORE TRUST Annual Report & Financial Statements December 2017

Transcription

1 Annual Report & Financial Statements December 2017

2 Manager Schroder Investment Management (Singapore) Ltd 138 Market Street #23-01 CapitaGreen Singapore Company Registration No H Trustee HSBC Institutional Trust Services (Singapore) Limited 21 Collyer Quay #13-02 HSBC Building Singapore Company Registration No R Auditor PricewaterhouseCoopers LLP 7 Straits View Marina One East Tower, Level 12 Singapore Solicitor to the Manager Clifford Chance Pte Ltd Marina Bay Financial Centre 25th Floor, Tower 3 12 Marina Boulevard Singapore Solicitor to the Trustee Shook Lin & Bok LLP 1 Robinson Road #18-00 AIA Tower Singapore Further Information Schroders is a Foreign Account Tax Compliance Act ( FATCA ) compliant organisation. Please find the FATCA classification of this Fund and its Global Intermediary Identification Number ( GIIN ) below. FATCA entity classification: GIIN: Nonreporting IGA FFI / Sponsored Investment Entity WM9S4Z SF.702 1

3 COMMENTARY January 2018 has seen a fierce spike up in oil prices and long-dated US bond yields. At this juncture, Singapore bond yields have remained within the % range despite the rise in US bond yields to nearly 2.60%. How will Singapore bond yields trade if US yields continue to climb? This has implications for valuing REITs and other stocks that are priced off bond yield spreads. Higher oil prices, if sustained at US$60-70, would provide the backdrop for potential positive surprises in orders for Singapore s offshore and marine sector. Likewise, banks exposure to this sector could see lower impairment charges. However, if oil prices rise materially, inflation and cost-push pressures could begin to surface. For now, the recovery in the oil and gas sector would also be positive for segments of the Singapore economy, especially since previous unemployment pressure was due to layoffs in this sector. How expensive is the market? On market valuations, while index price-to-book valuations are closer to the levels of median levels post the Global Financial Crisis, these averages mask the substantial divergence across sectors. If we look at dividend yield as another indicator, the chart also shows that index yields are now at the slightly lower end of the range. In other words, the market as a whole is no longer cheap. If bond yields and short term interest rates continue to rise, the valuation hurdle will become more of a headwind. The earnings recovery in Singapore has been narrow and concentrated mostly in banks, technology and property sectors. We believe this recovery has the potential to broaden, and we see more opportunities in mid-to-smaller cap companies, as well as consumer cyclicals. December

4 REPORT OF THE TRUSTEE The Trustee is under a duty to take into custody and hold the assets of Schroder Singapore Trust (the Fund ) in trust for the unitholders. In accordance with the Securities and Futures Act (Cap. 289), its subsidiary legislation and the Code on Collective Investment Schemes, the Trustee shall monitor the activities of the Manager for compliance with the limitations imposed on the investment and borrowing powers as set out in the Trust Deed in each annual accounting year and report thereon to unitholders in an annual report. To the best knowledge of the Trustee, the Manager has, in all material respects, managed the Fund during the financial year covered by these financial statements, set out on pages 8 to 34, in accordance with the limitations imposed on the investment and borrowing powers set out in the Trust Deed. For and on behalf of the Trustee HSBC Institutional Trust Services (Singapore) Limited 3

5 STATEMENT BY THE MANAGER In the opinion of Schroder Investment Management (Singapore) Ltd, the accompanying financial statements set out on pages 8 to 34, comprising the Statement of Total Return, Statement of Financial Position, Statement of Movements of Unitholders Funds, Statement of Portfolio and Notes to the Financial Statements are drawn up so as to present fairly, in all material respects, the financial position and portfolio holdings of (the Fund ) as at 31 December 2017, and the financial performance and movements of unitholders funds for the financial year then ended in accordance with the recommendations of Statement of Recommended Accounting Practice 7 Reporting Framework for Unit Trusts issued by the Institute of Singapore Chartered Accountants. At the date of this statement, there are reasonable grounds to believe that the Fund will be able to meet its financial obligations as and when they materialise. For and on behalf of Schroder Investment Management (Singapore) Ltd 4

6 INDEPENDENT AUDITOR S REPORT TO THE UNITHOLDERS OF SCHRODER SINGAPORE TRUST Our Opinion In our opinion, the accompanying financial statements of (the Fund ) are properly drawn up in accordance with the recommendations of Statement of Recommended Accounting Practice 7 Reporting Framework for Unit Trusts issued by the Institute of Singapore Chartered Accountants, so as to present fairly, in all material respects, the financial position and portfolio holdings of the Fund as at 31 December 2017, and of the financial performance and movements of unitholders funds for the financial year ended on that date. What we have audited The financial statements of the Fund comprise: the Statement of Total Return for the financial year ended 31 December 2017; the Statement of Financial Position as at 31 December 2017; the Statement of Movements of Unitholders Funds for the financial year ended 31 December 2017; the Statement of Portfolio as at 31 December 2017; and the notes to the financial statements, including a summary of significant accounting policies. Basis for Opinion We conducted our audit in accordance with Singapore Standards on Auditing ( SSAs ). Our responsibilities under those standards are further described in the Auditor s Responsibilities for the Audit of the Financial Statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Independence We are independent of the Fund in accordance with the Accounting and Corporate Regulatory Authority Code of Professional Conduct and Ethics for Public Accountants and Accounting Entities ( ACRA Code ) together with the ethical requirements that are relevant to our audit of the financial statements in Singapore, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ACRA Code. Other Information The Fund s Manager (the Manager ) is responsible for the other information. The other information comprises all sections of the annual report but does not include the financial statements and our auditor s report thereon. Our opinion on the financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed on the other information, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. 5

7 INDEPENDENT AUDITOR S REPORT TO THE UNITHOLDERS OF SCHRODER SINGAPORE TRUST Responsibilities of the Manager for the Financial Statements The Manager is responsible for the preparation and fair presentation of these financial statements in accordance with the recommendations of Statement of Recommended Accounting Practice 7 Reporting Framework for Unit Trusts issued by the Institute of Singapore Chartered Accountants and for such internal control as the Manager determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the Manager is responsible for assessing the Fund s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Manager either intends to terminate the Fund or to cease the Fund s operations, or has no realistic alternative but to do so. The Manager s responsibilities include overseeing the Fund s financial reporting process. Auditor s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with SSAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund s internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the Manager. Conclude on the appropriateness of the Manager s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Fund s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor s report. However, future events or conditions may cause the Fund to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. 6

8 INDEPENDENT AUDITOR S REPORT TO THE UNITHOLDERS OF SCHRODER SINGAPORE TRUST We communicate with the Manager regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. PricewaterhouseCoopers LLP Public Accountants and Chartered Accountants Singapore, 28 March

9 STATEMENT OF TOTAL RETURN Notes $ $ Income Dividends: Singapore 25,144,460 24,013,735 Foreign 1,126, ,435 Interest on deposits with banks 2 - Sundry income ,270,639 24,774,171 Less : Expenses Management fees 10 6,714,308 5,729,538 Trustee fees , ,213 Valuation fees , ,661 Custodian fees , ,972 Registration fees , ,356 Audit fees 19,967 19,010 Transaction costs 297, ,988 Others 255, ,390 8,419,532 7,274,128 Net income 17,851,107 17,500,043 Net gains or losses on value of investments and financial derivatives Net gains/(losses) on investments 146,825,650 (3,384,006) Net losses on spot foreign exchange contracts (12,060) (30,141) Net gains on futures contracts 391,899 1,421,375 Net foreign exchange (losses)/gains (9,677) 12, ,195,812 (1,979,875) Total return for the year before income tax 165,046,919 15,520,168 Less : Income tax 3 (353,637) (465,644) Total return for the year 164,693,282 15,054,524 8

10 STATEMENT OF FINANCIAL POSITION As at 31 December 2017 ASSETS Notes $ $ Portfolio of investments 821,591, ,873,084 Bank balances 10 34,385,432 7,998,765 Sales awaiting settlement 3,966, ,711 Receivables 5 4,257,937 3,338,550 Margin account ,056 - Total assets 864,685, ,737,110 LIABILITIES Purchases awaiting settlement 15,707,713 - Payables 6 12,465,712 9,529,356 Total liabilities 28,173,425 9,529,356 EQUITY Net assets attributable to unitholders 8 836,511, ,207,754 9

11 STATEMENT OF MOVEMENTS OF UNITHOLDERS FUNDS Notes $ $ Net assets attributable to unitholders at the beginning of the financial year 688,207, ,966,039 Operations Change in net assets attributable to unitholders resulting from operations 164,693,282 15,054,524 Unitholders' contributions/(withdrawals) Creation of units 194,983, ,235,081 Cancellation of units (191,808,633) (89,761,576) Change in net assets attributable to unitholders resulting from net creation and cancellation of units 3,174,809 28,473,505 Distributions 4 (19,563,905) (18,286,314) Total increase in net assets attributable to unitholders 148,304,186 25,241,715 Net assets attributable to unitholders at the end of the financial year 8 836,511, ,207,754 10

12 STATEMENT OF PORTFOLIO As at 31 December 2017 Primary Percentage of total net assets attributable to Holdings Fair value unitholders at at at 31 Dec Dec Dec 2017 By industry $ % Quoted Equities AGRICULTURE First Resources Ltd 7,364,100 13,770, Wilmar Intl Ltd 2,428,500 7,504, ,274, CONSUMER BreadTalk Group Ltd 30,100 51, Genting Singapore PLC 4,214,500 5,520, Jardine Cycle & Carriage Ltd 203,700 8,284, Singapore Press Hldg Ltd 787,200 2,086, ,942, DIVERSIFIED OPERATIONS Jardine Matheson Hldg Ltd 121,800 9,888, Keppel Corp Ltd 5,660,700 41,606, ,494, FINANCE DBS Group Hldg Ltd 5,673, ,981, ifast Corp Ltd 2,104,600 1,862, Oversea-Chinese Banking Corp Ltd 10,343, ,152, Singapore Exchange Ltd 1,884,900 14,023, United Overseas Bank Ltd 4,145, ,655, ,675, HEALTH CARE Raffles Medical Group Ltd 6,268,348 7,020,

13 STATEMENT OF PORTFOLIO As at 31 December 2017 Primary (continued) Percentage of total net assets attributable to Holdings Fair value unitholders at at at 31 Dec Dec Dec 2017 By industry $ % Quoted Equities INDUSTRIAL AND TRANSPORTATION ComfortDelGro Corp Ltd 8,967,700 17,756, HRnetgroup Ltd 3,847,581 2,943, SATS Ltd 1,747,100 9,084, SIA Engineering Co Ltd 2,258,600 7,069, Singapore Post Ltd 1,088,900 1,350, Venture Corp Ltd 891,100 18,240, ,444, REAL ESTATE CapitaLand Ltd 12,383,500 43,713, CapitaLand Mall Trust 1,321,600 2,815, City Developments Ltd 1,966,434 24,560, Frasers Centrepoint Trust 2,378,400 5,327, Frasers Logistics & Industrial Trust 16,496,500 19,135, Global Logistic Properties Ltd 3,916,400 13,198, Ho Bee Land Ltd 118, , Hongkong Land Hldg Ltd 2,157,800 20,301, Keppel DC REIT 874,000 1,249, Mapletree Commercial Trust 4,642,700 7,521, Mapletree Industrial Trust 10,721,065 21,763, Parkway Life REIT 113, , UOL Group Ltd 3,116,599 27,644, ,861,

14 STATEMENT OF PORTFOLIO As at 31 December 2017 Primary (continued) Percentage of total net assets attributable to Holdings Fair value unitholders at at at 31 Dec Dec Dec 2017 By industry $ % Quoted Equities TELECOMMUNICATIONS NetLink NBN Trust 8,983,136 7,500, Singapore Telecommunications Ltd 22,234,240 79,376, ,877, Portfolio of investments 821,591, Other net assets 14,920, Net assets attributable to unitholders 836,511,

15 STATEMENT OF PORTFOLIO As at 31 December 2017 Primary (continued) Percentage Percentage of total net of total net assets assets attributable attributable to to unitholders unitholders at at 31 Dec Dec 2016 By industry (summary) % % Quoted Agriculture Collective investment scheme - Equities Consumer Diversified Operations Finance Health Care Industrial and Transportation Real Estate Telecommunications Portfolio of investments Other net assets Net assets attributable to unitholders Secondary Percentage Percentage of total net of total net assets assets attributable attributable to to Fair value unitholders unitholders at at at 31 Dec Dec Dec 2016 By geography $ % % Singapore 821,591, Portfolio of investments 821,591, Other net assets 14,920, Net assets attributable to unitholders 836,511,

16 These notes form an integral part of and should be read in conjunction with the accompanying financial statements. 1. General (the Fund ) is a unit trust constituted by a Deed of Trust dated 10 September 1992 (and as amended, restated and supplemented from time to time) (thereafter referred to as Trust Deed ). The Trust Deed is governed in accordance with the laws of the Republic of Singapore. The Manager of the Fund is Schroder Investment Management (Singapore) Ltd and the Trustee is HSBC Institutional Trust Services (Singapore) Limited. The Fund, which was launched on 1 February 1993, seeks long-term capital growth primarily through investment in securities of companies listed on the Singapore Exchange. The portfolio of the Fund will be broadly diversified with no specific industry or sectoral emphasis. 2. Significant accounting policies The principal accounting policies applied in the preparation of these financial statements are set out below. (a) Basis of preparation The financial statements have been prepared under the historical cost convention, as modified by the revaluation of financial assets at fair value through profit or loss, and in accordance with the Statement of Recommended Accounting Practice 7 Reporting Framework for Unit Trusts ( RAP 7 ) issued by the Institute of Singapore Chartered Accountants in March 2017 for the financial year beginning on or after 1 July The Fund has adopted the following Singapore Financial Reporting Standards ( FRS ) and related amendments in accordance with the recommendations of the RAP 7: (i) Consolidation and disclosure of interests in other entities FRS 110 Consolidated financial statements FRS 112 Disclosure of interests in other entities Amendments to FRS 110, FRS 112 and FRS 27 Investment entities FRS 110 and the amendments define an investment entity and introduce an exception from the consolidation requirements for investment entities. 15

17 2. Significant accounting policies (continued) (a) Basis of preparation (continued) (i) Consolidation and disclosure of interests in other entities (continued) FRS 112 and the amendments require entities to disclose significant judgements and assumptions made in determining whether the entity controls, jointly controls, significantly influences or has some interests in other entities. Entities are also required to provide disclosure around certain structured entities. The amendments to FRS 112 introduce new disclosure requirements related to investment entities. (ii) Offsetting financial assets and liabilities disclosures Amendments to FRS 32 Financial instruments: Presentation Offsetting financial assets and financial liabilities Amendments to FRS 107 Disclosures Offsetting financial assets and financial liabilities The amendments to FRS 32 provide clarification on the offsetting criteria in FRS 32 and address inconsistencies in their application. The amendments to FRS 107 require additional disclosures to enable users of financial statements to evaluate the effect or the potential effects of netting arrangements, including rights of set-off associated with an entity s recognised financial assets and recognised financial liabilities, on the entity s financial position. The adoption of these new or amended FRS impacted the Fund s level of disclosures in certain of the above noted areas, but did not result in substantial changes to the accounting policies of the Fund and had no material effect on the amounts reported for the current or prior financial years. (b) Recognition of income Dividend income is recorded gross in the Statement of Total Return in the accounting year in which a dividend is declared payable by the investee company or underlying fund. Interest income on deposits is recognised on a time proportion basis using the effective interest method. 16

18 2. Significant accounting policies (continued) (c) Investments Investments are classified as financial assets held at fair value through profit or loss. Purchases of investments are recognised on trade date. Investments are recorded at fair value on initial recognition, and subsequently carried at fair value. The fair value of financial assets and liabilities traded in active markets is based on last traded market prices for equities on the reporting date. The fair value of investments in underlying fund is based on the quoted net asset value of the underlying fund on the reporting date. Investments are derecognised on the trade date of disposal. Net gains or losses on investments are taken up in the Statement of Total Return. (d) Foreign currency translation The Fund may hold assets and liabilities denominated in currencies other than Singapore dollars. The financial statements are presented in Singapore dollars, which is the Fund s functional and presentation currency. Foreign currency transactions during the year are translated into Singapore dollars at the rates of exchange ruling on the transaction dates. Foreign currency monetary assets and liabilities are translated into Singapore dollars at the rates of exchange ruling at the reporting date. Foreign exchange gains or losses resulting from the settlement of foreign currency transactions and from the translation at year end exchange rates of foreign currency monetary assets and liabilities, are taken to the Statement of Total Return. (e) Financial derivatives Financial derivatives are recognised at fair value on the date in which a financial derivative contract is entered into and are subsequently remeasured at their fair values. Fair values are obtained from quoted market prices in active markets, including recent market transactions. A financial derivative is carried as an asset when its fair value is positive, and as a liability when its fair value is negative. Net gains or losses on financial derivatives held for protection or enhancement of investments are taken to the Statement of Total Return as gains or losses on financial derivatives. 17

19 2. Significant accounting policies (continued) (f) Offsetting financial instruments Financial assets and liabilities are offset and the net amount reported in the Statement of Financial Position when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. The legally enforceable right must not be contingent on future events and must be enforceable in the normal course of business and in the event of default, insolvency or bankruptcy of the Fund or the counterparty. (g) Distribution The Manager shall have the absolute discretion to determine whether a distribution is to be made. In the event that the Manager determines that a distribution will be made, an amount required to effect such a distribution shall be transferred to a distribution account for payment on distribution date. This amount shall not be treated as part of the property of the Fund. Distribution is accrued for at the reporting date if the necessary approvals have been obtained and a legal or constructive obligation has been created. 3. Income tax The Fund has been approved by the Monetary Authority of Singapore under the Enhanced-Tier Fund Tax Incentive Scheme (Section 13X of the Income Tax Act) and is included in the Central Provident Fund Investment Scheme. Subject to certain conditions being met on an annual basis, the Fund will be granted tax exemption on the specified income in respect of any designated investment for the life of the Fund. The tax exemption does not apply in the year when the relevant conditions are not met. The terms specified income and designated investments are defined in the relevant Income Tax legislations and MAS Circulars $ $ Singapore income tax 353, ,644 The Singapore income tax represents tax deducted at source for Singapore sourced dividends. 18

20 4. Distributions The Fund distributed a total of $19,563,905 (2016: $18,286,314) to Class SGD A Distribution unitholders on the register during the year as disclosed below Class SGD A Distribution Record date Payment date Distribution rate $ per 100 units Distribution amount $ 31 Mar Apr ,581, Jun Jul ,504, Sep Oct ,425, Jan 2018* 14 Feb ,052,846 19,563,905 *The distribution declared on 16 January 2018 was approved by the Manager in Class SGD A Distribution Record date Payment date Distribution rate $ per 100 units Distribution amount $ 31 Mar Apr ,245, Jun Jul ,350, Sep Oct ,433, Jan 2017* 14 Feb ,257,484 18,286,314 *The distribution declared on 16 January 2017 was approved by the Manager in Receivables $ $ Amount receivable for creation of units 1,830,134 1,461,045 Dividend receivable 2,213,452 1,696,011 Refund of GST 214, ,446 Other ,257,937 3,338,550 19

21 6. Payables $ $ Amount payable for cancellation of units 2,685, ,664 Amount payable for dividend distribution 9,052,846 8,257,484 Accrued management fees 612, ,100 Accrued trustee fees 22,845 19,251 Accrued valuation fees 12,701 14,984 Other accrued expenses 79,865 72,873 12,465,712 9,529, Financial derivatives Financial derivative contracts comprise spot foreign exchange contracts due for settlement or contractual re-pricing within 3 months (2016: Nil) from the reporting date. The contracted or underlying principal amounts of these financial derivatives and their corresponding gross fair values at the reporting date are analysed below. Notional amount $ Fair value liabilities $ 2017 Contracts: Spot foreign exchange 25 * * Less than Units in issue Class SGD A Distribution Units Units At the beginning of the financial year 325,258, ,194,412 Created 43,649,134 62,823,111 Cancelled (72,882,575) (40,759,192) At the end of the financial year 296,024, ,258,331 $ $ Net assets attributable to unitholders 485,812, ,138,682 Net assets attributable to unitholders per unit

22 8. Units in issue (continued) Class SGD A Accumulation For the financial period from 2 Feb 2017 (date of inception) to 31 Dec 2017 Units At the beginning of the financial period - Created 69,453,695 Cancelled (15,078,729) At the end of the financial period 54,374,966 Net assets attributable to unitholders 63,464,168 Net assets attributable to unitholders per unit 1.17 $ Class USD A Accumulation For the financial period from 2 Feb 2017 (date of inception) to 31 Dec 2017 Units At the beginning of the financial period - Created 235,271 Cancelled (49,235) At the end of the financial period 186,036 US$ Net assets attributable to unitholders 230,105 Net assets attributable to unitholders per unit

23 8. Units in issue (continued) Class SGD I Accumulation Units Units At the beginning of the financial year 7,770,023 7,594,959 Created 7,755, ,500 Cancelled (2,991,449) (159,436) At the end of the financial year 12,534,478 7,770,023 $ $ Net assets attributable to unitholders 36,660,895 18,146,635 Net assets attributable to unitholders per unit Class SGD M Accumulation Units Units At the beginning of the financial year 165,366, ,866,660 Created 20,865,848 23,799,215 Cancelled (36,103,574) (25,298,953) At the end of the financial year 150,129, ,366,922 $ $ Net assets attributable to unitholders 250,266, ,922,437 Net assets attributable to unitholders per unit The Fund currently offers 5 Classes of units, namely Class SGD A Distribution units, Class SGD A Accumulation units, Class SGD I Accumulation units, Class SGD M Accumulation units and Class USD A Accumulation units. All 5 Classes of units constitute the Fund and have different features. The key differences between the Classes are the management fee rate, currency of denomination and distribution policy applicable to each Class. The Class USD A Acc is subject to foreign exchange risk against the Fund s functional currency. The Class SGD A Acc and Class USD A Acc were incepted on 2 February Net assets attributable to unitholders ( NAV ) is apportioned between all 5 Classes of units based on the proportion of NAV of each Class, which is determined by computing the equivalent number of units of Class SGD A Dis, Class SGD A Acc, Class SGD I Acc, Class SGD M Acc and Class USD A Acc units in issue. Any expense, income and/or gain which is attributable to a particular Class shall be deducted from or added to the net assets attributable to that Class. Acc : Accumulation Dis : Distribution 22

24 8. Units in issue (continued) A reconciliation of the net assets attributable to unitholders per unit per the financial statements and the net assets attributable to unitholders per unit for issuing/redeeming units at the financial year end date is presented below: Class SGD A Distribution $ $ Net assets attributable to unitholders per unit per the financial statements Effect for movement in the net asset value between the last dealing date and the financial year end date^ * * Effect of distribution per unit Net assets attributable to unitholders per unit for issuing/redeeming of units Class SGD A Accumulation 2017 $ Net assets attributable to unitholders per unit per the financial statements 1.17 Effect for movement in the net asset value between the last dealing date and the financial year end date^ * Net assets attributable to unitholders per unit for issuing/redeeming of units 1.17 Class USD A Accumulation 2017 US$ Net assets attributable to unitholders per unit per the financial statements 1.24 Effect for movement in the net asset value between the last dealing date and the financial year end date^ * Net assets attributable to unitholders per unit for issuing/redeeming of units 1.24 Class SGD I Accumulation $ $ Net assets attributable to unitholders per unit per the financial statements Effect for movement in the net asset value between the last dealing date and the financial year end date^ * * Net assets attributable to unitholders per unit for issuing/redeeming of units

25 8. Units in issue (continued) Class SGD M Accumulation $ $ Net assets attributable to unitholders per unit per the financial statements Effect for movement in the net asset value between the last dealing date and the financial year end date^ * * Net assets attributable to unitholders per unit for issuing/redeeming of units * Less than 0.01 ^ The net asset value for the purposes of processing unit subscription and redemption was established in accordance with the methodology indicated in the Fund s Prospectus. This item reflects the movement in the net asset value per unit between the last dealing dates and the financial year end dates of 2017 and 2016 respectively. 9. Financial risk management The Fund s activities expose it to a variety of risks including but not limited to market risk (including price risk, interest rate risk and currency risk), liquidity risk and credit risk. The overall responsibility for the management of the Fund s financial risks lies with the Manager whom, among other things, will regularly assess the economic condition, monitor changes in market outlook and take appropriate measures accordingly to manage the Fund s exposure to these risks. The Manager may from time to time employ derivatives including but not limited to options, futures and currency forwards, subject to the terms of the Trust Deed, for the purpose of efficient portfolio management. The data used and assumptions made in the sensitivity analyses below may not reflect actual market conditions, nor is it representative of any potential future market conditions. The sensitivity analyses can be complex and the disclosures made here are not exhaustive. The market exposures change regularly and the assumptions made below may not be representative of the risk taken throughout the year. The sensitivity analyses below should not be solely relied upon by investors in their investment decision making. 24

26 9. Financial risk management (continued) (a) Market risk Market risk is the risk of potential adverse changes to the value of financial instruments because of changes in market conditions such as interest rate and currency rate movements and volatility in security prices. The Fund s investments are monitored by the Manager on a regular basis so as to assess changes in fundamentals and valuation. Although the Manager conducts detailed analysis before making investment decisions, events beyond reasonable control of the Manager could affect the prices of the underlying investments and hence the net asset value of the Fund. The Manager may also select other financial instruments within the investment guidelines as set out in the Fund s Trust Deed. Guidelines are set to reduce the Fund s risk exposure to market volatility through diversifying the portfolio by investing across various industry sectors. The benchmark against which the performance of the Fund is measured is the MSCI Singapore Free Index. At reporting date, the Fund s assets principally consist of quoted equities and bank balances. The Fund s exposure to market risk are discussed below: (i) Price risk The table below summarises the potential impact of increases/decreases in the value of the Fund s investments in equities on the Fund s net assets attributable to unitholders at reporting date. The analysis is based on the assumption that the benchmark increases/decreases by a reasonable possible shift with all other variables held constant, and that the fair value of the Fund s investments moves according to their historical correlation with the benchmark. This represents management s best estimate of a reasonable possible shift in the benchmark, having regard to the historical movement of the benchmark. Reasonable possible change Impact on Impact on net assets Reasonable net assets attributable to possible attributable to unitholders change unitholders % $ % $ 8 55,630, ,206,713 The disclosure above is shown in absolute terms, changes and impacts could be positive or negative. 25

27 9. Financial risk management (continued) (a) Market risk (continued) (ii) Interest rate risk The majority of the Fund s financial assets and liabilities are noninterest bearing; as a result, the Fund is not subject to significant amounts of risk due to fluctuations in the prevailing levels of market interest rates. No interest rate sensitivity analysis is presented. (iii) Currency risk The Fund may hold monetary and non-monetary assets and liabilities denominated in currencies other than Singapore dollars. Consequently, the Fund may be exposed to currency risk since the value of these assets and liabilities denominated in other currencies will fluctuate due to changes in exchange rates. The Manager may manage the currency risks by hedging some or all of the currency risk exposure through derivatives such as forward currency contracts, currency futures, currency swap agreements or currency options. The table below summarises the Fund s exposure to foreign currencies from its monetary and non-monetary assets and liabilities: Assets As at 31 December 2017 SGD USD Total $ $ $ Portfolio of investments 791,401,983 30,189, ,591,609 Bank balances 34,384, ,385,432 Sales awaiting settlement 3,966,331-3,966,331 Receivables 4,257, ,257,937 Margin account 484, ,056 Total assets 834,494,750 30,190, ,685,365 Liabilities Purchases awaiting settlement 15,707,713-15,707,713 Payables 12,465, ,465,712 Total liabilities 28,173, ,173,425 Net financial assets 806,321,731 30,190, ,511,940 Currency spot (25) 25 Currency exposure 806,321,706 30,190,234 26

28 9. Financial risk management (continued) (a) Market risk (continued) (iii) Currency risk (continued) As at 31 December 2016 SGD USD Total $ $ $ Assets Portfolio of investments 649,130,536 36,742, ,873,084 Bank balances 7,998, ,998,765 Sales awaiting settlement 526, ,711 Receivables 3,338,550-3,338,550 Total assets 660,993,840 36,743, ,737,110 Liabilities Payables 9,528,342 1,014 9,529,356 Total liabilities 9,528,342 1,014 9,529,356 Currency exposure 651,465,498 36,742,256 Portfolio of investments, which is the most significant item on the Statement of Portfolio, is exposed to currency risk and price risk. The price risk sensitivity analysis in note 9(a)(i) includes the impact of currency risk on portfolio of investments. The Fund s net financial assets comprise mainly portfolio of investments which are non-monetary financial assets, hence a separate currency risk sensitivity analysis has not been performed on the remaining financial assets. 27

29 9. Financial risk management (continued) (b) Liquidity risk The Fund s liquidity risk arises mainly from redemptions of units. The Fund invests the majority of its assets in investments that are traded in active markets and/or in investments where the issuer stands ready to unwind. Investments in unquoted shares (excluding IPO shares which have been approved for listing) are allowed within the 5% deviation limit. The Fund has the ability to borrow in the short-term for the purposes of meeting redemptions and short-term bridging requirements. Dedicated personnel are responsible for monitoring the Fund s liquidity position on a daily basis to ensure that sufficient cash resources and liquid assets are available to meet liabilities as and when they fall due. Units are redeemable at the holder s option. However, the Manager also has the option to limit redemption requests to 10% of the total number of units then in issue on each dealing day, with the approval of the Trustee. The table below analyses the Fund s financial liabilities into relevant maturity groupings based on the remaining period at the reporting date to the contractual maturity date. The amounts in the table are the contractual undiscounted cash flows. Balances due within 12 months approximate their carrying values as the impact of discounting is not significant Less than Less than 3 months 3 months $ $ Purchases awaiting settlement 15,707,713 - Payables 12,465,712 9,529,356 28

30 9. Financial risk management (continued) (c) Credit risk The Fund takes on exposure to credit risk, which is the risk that a counterparty will be unable to pay amounts in full when due, including transactions with counterparties such as issuers, brokers, custodians and banks. Impairment allowances are made for losses that have been incurred by the reporting date, if any. The Manager has in place procedures for proper credit screening and monitoring of credit risk, including the use of approved counterparties with credit limits set and subject to specified financial strength criteria. Exposure against all counterparties is then monitored on a daily basis. All transactions in quoted securities are settled/paid upon delivery using approved brokers. The risk of default is deemed to be low, as delivery of securities is only made once the broker has received payment. Payment is made on a purchase once the securities have been received by the broker. The trade will fail if either party fails to meet its obligation. The Fund s exposure to credit risk arises mainly from its bank balances and assets held with custodians and counterparties. The table below summarises the credit rating of banks and custodians with whom the Fund s assets are held as at reporting date. As at 31 December 2017 Credit rating Source of credit rating Bank & Custodian The Hongkong and Shanghai Banking Corp Ltd a1 Moody s As at 31 December 2016 Credit rating Source of credit rating Bank & Custodian The Hongkong and Shanghai Banking Corp Ltd aa3 Moody s The credit ratings shown are the Baseline Credit Assessment ratings as published by Moody s. The maximum exposure to credit risk at the reporting date is the carrying amount of the financial assets. The custodian of the underlying fund held as at 31 December 2016 was The Hongkong and Shanghai Banking Corporation Limited whose credit rating has been disclosed above. 29

31 9. Financial risk management (continued) (d) Fair value estimation The fair value of financial instruments is based on quoted market prices as at the reporting date. The quoted market price used for the underlying fund is the quoted net asset value of the underlying fund as determined by the underlying fund s administrator, the quoted market price used for equities is the last traded market price, and the quoted market price used for other financial assets is the current bid price; the appropriate quoted market price used for financial liabilities is the current asking price. The Fund classifies fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) Level 3: Inputs for the asset or liability that are not based on observable market data (that is, unobservable inputs) The following table analyses within the fair value hierarchy the Fund s financial instruments measured at fair value at reporting date: Assets Financial assets at fair value through profit or loss As at 31 December 2017 Level 1 Level 2 Level 3 Total $ $ $ $ Equities 821,591, ,591,609 Assets Financial assets at fair value through profit or loss As at 31 December 2016 Level 1 Level 2 Level 3 Total $ $ $ $ Collective investment scheme 8,938, ,938,800 Equities 676,934, ,934, ,873, ,873,084 30

32 9. Financial risk management (continued) (d) Fair value estimation (continued) Investments in open-ended investment funds whose net asset value is struck daily, price information is published and readily available and units are subscribed and redeemable on demand at the published price, are classified within level 1. Investments in listed equities whose values are based on quoted market prices in active markets are classified within level 1. The quoted price for these financial instruments is not adjusted. There are no financial instruments classified within level 2 and level 3. Except for bank balances which are classified as level 1, the Fund's assets and liabilities not measured at fair value at reporting date have been classified as level 2. The carrying amounts of these assets and liabilities approximate their fair values as at the reporting date. (e) Offsetting financial assets and financial liabilities There were no significant outstanding financial assets and liabilities subject to offsetting, enforceable master netting arrangements or similar agreements as at reporting date. (f) Capital management The Fund s capital is represented by the net assets attributable to unitholders. The Fund strives to invest the subscriptions of units in investments that meet the Fund s investment objectives while maintaining sufficient liquidity to meet unitholder redemptions. 31

33 10. Related party disclosure The Manager of the Fund is Schroder Investment Management (Singapore) Ltd. The Registrar for the Fund is Schroder Investment Management (Luxembourg) SA, a related party of the Manager. The Trustee is HSBC Institutional Trust Services (Singapore) Limited, a subsidiary of the HSBC Group. The management fees paid to the Manager and registration fees paid to the Registrar; trustee fees, valuation fees and custodian fees charged by the HSBC Group are shown in the Statement of Total Return. As at reporting date, the Fund maintained with the HSBC Group, the following bank balances: $ $ Current accounts 34,385,432 7,998, Margin account $ $ Margin account 484,056 - Margin account represents the margin deposit amount held with a broker. 32

34 12. Financial ratios 2017 Class SGD I Acc 2 Feb 2017 (date of inception) to 31 Dec 2017 Class SGD Class SGD Class SGD Class USD A Dis M Acc A Acc A Acc (annualised) Expense ratio % 0.13% 0.50% 1.31% 1.28% 2016 Class SGD A Dis Class SGD I Acc Class SGD M Acc Expense ratio % 0.13% 0.50% Fund Fund Turnover ratio % 12.84% 1 The expense ratio has been computed based on the guidelines laid down by the Investment Management Association of Singapore ( IMAS ). The calculation of the expense ratio was based on total operating expenses divided by the average net asset values for each Class for the year. The total operating expenses do not include brokerage and other transaction costs, performance fee, interest expense, distribution paid out to unitholders, foreign exchange gains/losses, front or back end loads arising from the purchase or sale of other funds and tax deducted at source or arising out of income received. Expenses which are common to all Classes are apportioned based on the proportion of NAV of each Class. The Fund does not pay any performance fee. The respective values used in the calculation of the expense ratio are disclosed below. The average net asset values are based on the daily balances. The Fund invests in real estate investment trusts (REITs), for which the expense ratios are not available or published. The expense ratio of the Fund does not include the expense ratios of those underlying REITs. 2 Feb 2017 (date of inception) to Dec 2017 Expense ratio calculations Class SGD A Dis Class SGD I Acc Class SGD M Acc Class SGD A Acc Class USD A Acc $ $ $ $ $ (annualised) Total operating expenses 6,287,840 27,203 1,177, ,688 3,558 Average net asset value 471,872,573 20,966, ,812,716 51,483, ,463 Expense ratio 2016 calculations Class SGD A Dis Class SGD I Acc Class SGD M Acc $ $ $ Total operating expenses 5,854,702 22,837 1,068,595 Average net asset value 438,714,280 17,176, ,546,026 33

35 12. Financial ratios (continued) 2 The portfolio turnover ratio is calculated in accordance with the formula stated in the Code on Collective Investment Schemes. The calculation of the portfolio turnover ratio was based on the lower value of purchases or sales of the underlying investments divided by the average daily net asset value Turnover ratio calculations Fund Fund $ $ Lower of purchases or sales 100,446,332 (purchases) 86,114,772 (sales) Average net asset value 778,037, ,436,848 34

36 REPORT TO UNITHOLDERS 31 December 2017 The following is a report on the (the Fund ): 1. Top 10 holdings of the Fund as at 31 December 2017: Percentage of total net assets attributable to Fair value unitholders $ % DBS Group Hldg Ltd 140,981, Oversea-Chinese Banking Corp Ltd 128,152, United Overseas Bank Ltd 109,655, Singapore Telecommunications Ltd 79,376, CapitaLand Ltd 43,713, Keppel Corp Ltd 41,606, UOL Group Ltd 27,644, City Developments Ltd 24,560, Mapletree Industrial Trust 21,763, Hongkong Land Hldg Ltd 20,301, Top 10 holdings of the Fund as at 31 December 2016: Percentage of total net assets attributable to Fair value unitholders $ % DBS Group Hldg Ltd 93,233, Singapore Telecommunications Ltd 90,510, United Overseas Bank Ltd 77,886, Oversea-Chinese Banking Corp Ltd 75,273, CapitaLand Ltd 40,351, ComfortDelGro Corp Ltd 35,674, Keppel Corp Ltd 29,911, UOL Group Ltd 24,278, Hongkong Land Hldg Ltd 19,732, Mapletree Industrial Trust 17,636, The Fund was not invested in other unit trusts, mutual funds or collective investment schemes as at 31 December 2017 other than as stated in the Statement of Portfolio. For the full composition of investments of the Fund as at 31 December 2017, refer to the Statement of Portfolio on pages 11 to

37 REPORT TO UNITHOLDERS 31 December The Fund did not have any significant exposure to financial derivatives as at 31 December The Fund did not have any borrowings as at 31 December The amount of subscriptions and redemptions during the period 1 January 2017 to 31 December 2017 were as follows: Subscriptions 194,983,442 Redemptions 191,808, Expense Ratio Class SGD A Distribution 1 January 2017 to 31 December % 1 January 2016 to 31 December % Class SGD A Accumulation 2 February 2017 (date of inception) to 31 December 2017 (annualised) 1.31% Class USD A Accumulation 2 February 2017 (date of inception) to 31 December 2017 (annualised) 1.28% Class SGD I Accumulation 1 January 2017 to 31 December % 1 January 2016 to 31 December % Class SGD M Accumulation 1 January 2017 to 31 December % 1 January 2016 to 31 December % 6. Turnover of Portfolio 1 January 2017 to 31 December % 1 January 2016 to 31 December % $ 36